##### Table of Contents



SECURITIES AND EXCHANGE
    COMMISSION
 450 Fifth Street,
    N.W.
 Washington, D.C.
    20549
  Form 10-K
  þ

Annual Report Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934For the Fiscal Year Ended
    June 30, 2006ORo

Transition Report Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934For the transition period
    from          to   Commission File No. 000-51557
 Investors Bancorp,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

22-3493930(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification Number)101 JFK Parkway, Short
    Hills, New Jersey

07078(Address of Principal Executive
    Offices)

Zip Code   (973) 924-5100
 (Registrants telephone
    number)
  Securities Registered Pursuant to Section 12(b) of the
    Act:
 Common Stock, par value $0.01 per share
 (Title of Class)
  Securities Registered Pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 o o þ
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  1.
    Proxy Statement for the 2006 Annual Meeting of Stockholders of
    the Registrant (Part III).




---



##### 



INVESTORS
    BANCORP, INC.
  2006
    ANNUAL REPORT ON
    FORM 10-K
  TABLE OF
    CONTENTS
  PagePart IItem 1.

Business


1Item 1A.

Risk
    Factors


31Item 1B.

Unresolved Staff
    Comments


34Item 2.

Properties.


34Item 3.

Legal
    Proceedings


34Item 4.

Submission of
    Matters to a Vote of Security Holders


34Part IIItem 5.

Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


35Item 6.

Selected Financial
    Data


36Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


37Item 7A.

Quantitative and
    Qualitative Disclosures about Market Risk


52Item 8.

Financial
    Statements and Supplementary Data


52Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


52Item 9A.

Controls and
    Procedures


52Item 9B.

Other
    Information


52Part IIIItem 10.

Directors and
    Executive Officers of the Registrant


52Item 11.

Executive
    Compensation.


53Item 12.

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


53Item 13.

Certain
    Relationships and Related Transactions.


53Item 14.

Principal
    Accountant Fees and Services.


53Part IVItem 15.

Exhibits and
    Financial Statement Schedules


53SIGNATURES


88EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATION




---



##### Table of Contents



PART I  Forward
    Looking Statements
      ITEM 1.
    BUSINESS  INVESTORS
    BANCORP, INC.
        INVESTORS
    SAVINGS BANK
  General




---



##### Table of Contents



(973) 924-5100.
    Market
    Area
      Competition
      Lending
    Activities
   2




---



##### Table of Contents



Loan Portfolio Composition.
  At June 30,2006


2005


2004


2003


2002Amount


Percent


Amount


Percent


Amount


Percent


Amount


Percent


Amount


Percent(Dollars in thousands)Residential mortgage
    loans:One- to four-family

$
2,646,056



89.75
%

$
1,850,806



93.18
%

$
987,958



89.26
%

$
652,532



83.41
%

$
831,326



83.62
%FHA


20,503



0.70



30,273



1.52



43,923



3.97



67,633



8.65



101,013



10.16Total residential mortgage loans


2,666,559



90.45



1,881,079



94.70



1,031,881



93.23



720,165



92.06



932,339



93.78Multi-family and
    commercial


76,976



2.61



17,181



0.86



6,147



0.56



7,011



0.90



7,878



0.79Construction loans


65,459



2.22



6,465



0.33



845



0.08



145



0.02



380



0.04Consumer and other
    loans:Home equity loans


112,977



3.83



45,591



2.30



29,731



2.69



21,948



2.81



28,288



2.85Home equity credit lines


24,770



0.84



34,840



1.75



36,513



3.30



31,321



4.00



23,599



2.37Other


1,589



0.05



1,210



0.06



1,588



0.14



1,620



0.21



1,718



0.17Total consumer and other loans


139,336



4.72



81,641



4.11



67,832



6.13



54,889



7.02



53,605



5.39Total loans

$
2,948,330



100.00
%

$
1,986,366



100.00
%

$
1,106,705



100.00
%

$
782,210



100.00
%

$
994,202



100.00
%Premiums on purchased loans


20,327







14,113







5,274







1,694







3,160Deferred loan fees, net


(1,734
)






(881
)






(905
)






(703
)






(132
)Allowance for loan losses


(6,340
)






(5,694
)






(5,193
)






(4,750
)






(4,320
)Net loans

$
2,960,583






$
1,993,904






$
1,105,881






$
778,451






$
992,910   Loan Portfolio Maturities and
    Yields.
  At June 30, 2006Residential


Multi-Family


Construction


Consumer andMortgage


and Commercial


Loans


Other Loans


Total(In thousands)Amounts Due:One year or less

$
968


$
365


$
10,295


$
1,792


$
13,420After one year:One to three years


2,334



452



55,164



2,675



60,625Three to five years


7,584



1,609







8,433



17,626Five to ten years


45,661



37,440







28,271



111,372Ten to twenty years


508,007



32,452







84,061



624,520Over twenty years


2,102,005



4,658







14,104



2,120,767Total due after one year


2,665,591



76,611



55,164



137,544



2,934,910Total loans

$
2,666,559


$
76,976


$
65,459


$
139,336


$
2,948,330Premiums on purchased loans


















20,327Deferred loan fees, net


















(1,734
)Allowance for loan losses


















(6,340
)Net loans

















$
2,960,583  3




---



##### Table of Contents



Due After June 30, 2007Fixed


Adjustable


Total(In thousands)Residential mortgage
    loans:One- to four-family

$
1,361,956


$
1,283,132


$
2,645,088FHA


20,503







20,503Total residential mortgage loans


1,382,459



1,283,132



2,665,591Multi-family and
    commercial


62,717



13,894



76,611Construction loans






55,164



55,164Consumer and other
    loansHome equity loans


112,725







112,725Home equity credit lines






24,711



24,711Other


108







108Total consumer and other loans


112,833



24,711



137,544Total loans

$
1,558,009


$
1,376,901


$
2,934,910   Residential Mortgage Loans. loan-to-value
       4




---



##### Table of Contents



due-on-sale
  Consumer Loans. loan-to-value The Wall Street Journal
  Multi-family and Commercial Real Estate
    Loans. loan-to-value
  loan-to-value
    Construction Loans.
 5




---



##### Table of Contents



Loan Originations, Purchases, Participations and Servicing
    of Loans.
      For the Years Ended June 30,2006


2005


2004(In thousands)Loan originations and
    purchases:Loan originations:Residential mortgage loans:One- to four-family

$
227,454


$
239,426


$
255,525FHA






326



2,978Total residential mortgage loans


227,454



239,752



258,503Multi-family and commercial


67,519



10,837



Construction loans


94,965



5,324



700Consumer and other loans:Home equity loans


80,870



23,309



16,011Home equity credit lines


16,396



5,029



10,048Other


1,817



652



734Total consumer and other loans


99,083



28,990



26,793Total loan originations


489,021



284,903



285,996 6




---



##### Table of Contents



For the Years Ended June 30,2006


2005


2004(In thousands)Loan purchases:Residential mortgage loans:One- to four-family


824,842



846,104



329,637FHA






767



1,941Total residential mortgage loans


824,842



846,871



331,578Multi-family and commercial










Construction loans










Consumer and other loans:Home equity loans










Home equity credit lines










Other










Total loan purchases


824,842



846,871



331,578Loan principal repayments


(351,899
)


(252,113
)


(293,079
)Net increase in loan portfolio

$
961,964


$
879,661


$
324,495     Loan Approval Procedures and
    Authority.
     7




---



##### Table of Contents



Loans to One Borrower.
  Asset
    Quality
    Collection Procedures.
   8




---



##### Table of Contents



Delinquent Loans.
  Loans Delinquent for60-89 Days


90 Days and Over


TotalNumber


Amount


Number


Amount


Number


Amount(Dollars in thousands)At June 30, 2006Residential mortgage loans:One- to four-family


5


$
626



11


$
1,346



16


$
1,972FHA


7



682



15



1,440



22



2,122Total residential mortgage loans


12



1,308



26



2,786



38



4,094Multi-family and commercial










3



477



3



477Construction loans






















Consumer and other loansHome equity loans










1



6



1



6Home equity credit lines










1



30



1



30Other


4



51











4



51Total consumer and other loans


4



51



2



36



6



87Total


16


$
1,359



31


$
3,299



47


$
4,658At June 30, 2005Residential mortgage loans:One- to four-family


3


$
359



21


$
3,237



24


$
3,596FHA


1



119



34



3,825



35



3,944Total residential mortgage loans


4



478



55



7,062



59



7,540Multi-family and commercial










4



608



4



608Construction loans






















Consumer and other loansHome equity loans


1



33



3



193



4



226Home equity credit lines


1



40











1



40Other


4



3



2



2



6



5Total consumer and other loans


6



76



5



195



11



271Total


10


$
554



64


$
7,865



74


$
8,419At June 30, 2004Residential mortgage loans:One- to four-family


12


$
2,269



26


$
3,021



38


$
5,290FHA


3



276



52



5,559



55



5,835Total residential mortgage loans


15



2,545



78



8,580



93



11,125Multi-family and commercial










3



437



3



437Construction loans






















Consumer and other loansHome equity loans










2



18



2



18Home equity credit lines










1



30



1



30Other










1



1



1



1Total consumer and other loans










4



49



4



49Total


15


$
2,545



85


$
9,066



100


$
11,611  9




---



##### Table of Contents



Non-Performing Assets.
  At June 30,2006


2005


2004


2003


2002(Dollars in thousands)Non-accrual loans:Residential mortgage loans:One- to four-family

$
1,346


$
3,237


$
3,021


$
3,786


$
5,098FHA


1,440



3,825



5,559



6,324



6,003Total residential mortgage loans


2,786



7,062



8,580



10,110



11,101Multi-family and commercial


477



608



437



451



857Construction loans


















Consumer and other loans:Home equity loans


6



193



18



24



38Home equity credit lines


30







30



110



66Other






2



1



2



1Total consumer and other loans


36



195



49



136



105Total


3,299



7,865



9,066



10,697



12,063Total non-performing loans


3,299



7,865



9,066



10,697



12,063Real estate owned










154



110



202Total non-performing assets

$
3,299


$
7,865


$
9,220


$
10,807


$
12,265Total non-performing loans to
    total loans


0.11
%


0.40
%


0.82
%


1.37
%


1.21
%Total non-performing loans to
    total assets


0.06
%


0.16
%


0.17
%


0.20
%


0.23
%Total non-performing assets to
    total assets


0.06
%


0.16
%


0.17
%


0.20
%


0.24
%     Real Estate Owned.
  Classified Assets.
   10




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##### Table of Contents



Allowance
    for Loan Losses
      Allowance for Loan Losses.
  At or for the Years Ended June 30,2006


2005


2004


2003


2002(Dollars in thousands)Allowance balance (beginning of
    period)

$
5,694


$
5,193


$
4,750


$
4,320


$
3,847Provision for loan losses


600



600



600



600



500Charge-offs:Residential mortgage loansOne- to four-family






3



18



56



20FHA


143



108



276







Total residential mortgage loans


143



111



294



56



20Multi-family and commercial loans














384



Construction loans


















Consumer and other loans


10



14



12



8



9Total charge-offs


153



125



306



448



29 11




---



##### Table of Contents



At or for the Years Ended June 30,2006


2005


2004


2003


2002(Dollars in thousands)Recoveries:Residential mortgage loansOne- to four-family






25



28







FHA


196















Total residential mortgage loans


196



25



28







Multi-family and commercial loans










109



275



Construction loans


















Consumer and other loans


3



1



12



3



2Total recoveries


199



26



149



278



2Net recoveries (charge-offs)


46



(99
)


(157
)


(170
)


(27
)Allowance balance (end of period)

$
6,340


$
5,694


$
5,193


$
4,750


$
4,320Total loans outstanding

$
2,948,330


$
1,986,366


$
1,106,705


$
782,210


$
994,202Average loans outstanding


2,427,506



1,502,704



895,759



889,599



973,110Allowance for loan losses as a
    percent of total loans outstanding


0.22
%


0.29
%


0.47
%


0.61
%


0.43
%Net loans charged off as a percent
    of average loans outstanding


0.00
%


(0.01
)%


(0.02
)%


(0.02
)%


0.00
%Allowance for loan losses to
    non-performing loans


192.18
%


72.40
%


57.29
%


44.40
%


35.82
%   Allocation of Allowance for Loan
    Losses.
  At June 30,2006


2005


2004Percent of





Percent of





Percent ofLoans in Each





Loans in Each





Loans in EachAllowance for


Category to


Allowance for


Category to


Allowance for


Category toLoan Losses


Total Loans


Loan Losses


Total Loans


Loan Losses


Total Loans(Dollars in thousands)End of period allocated
    to:Residential mortgage loans:One- to four-family

$
2,756



89.75
%

$
3,749



93.18
%

$
2,979



89.26
%FHA


139



0.70



485



1.52



429



3.97Total residential mortgage loans


2,895



90.45
%


4,234



94.70
%


3,408



93.23
%Multi-family and commercial


1,583



2.61
%


703



0.86
%


878



0.56
%Construction loans


818



2.22
%


26



0.33
%


4



0.08
%Consumer and other loans:Home equity loans


282



3.83
%


136



2.30
%


89



2.69
%Home equity credit lines


64



0.84



105



1.75



110



3.30Other


4



0.05



4



0.06



4



0.14Total consumer and other loans


350



4.72
%


245



4.11
%


203



6.13
%Unallocated


694







486







700Total allowance

$
6,340



100.00
%

$
5,694



100.00
%

$
5,193



100.00
%   12




---



##### Table of Contents



At June 30,2003


2002Percent of





Percent ofLoans in Each





Loans in EachAllowance for


Category to


Allowance for


Category toLoan Losses


Total Loans


Loan Losses


Total Loans(Dollars in thousands)End of period allocated
    to:Residential mortgage loans:One- to four-family

$
1,983



83.41
%

$
2,540



83.62
%FHA


597



8.65



415



10.16Total residential mortgage loans


2,580



92.06
%


2,955



93.78
%Multi-family and commercial


1,059



0.90
%


1,162



0.79
%Construction loans


1



0.02
%


2



0.04
%Consumer and other loans:Home equity loans


66



2.81
%


85



2.85
%Home equity credit lines


94



4.00



71



2.37Other


5



0.21



5



0.17Total consumer and other loans


165



7.02
%


161



5.39
%Unallocated


945







40Total allowance

$
4,750



100.00
%

$
4,320



100.00
%   Security
    Investments
      and/or
  held-to-maturity available-for-sale held-to-maturity available-for-sale
 13




---



##### Table of Contents



Mortgage-Backed Securities.
        Corporate and Other Debt Securities.
  Government Sponsored Enterprises.
  Marketable Equity Securities. available-for-sale.
 14




---



##### Table of Contents



Securities Portfolios.
  Securities
    Held-to-Maturity
  At June 30,2006


2005


2004Amortized


Estimated


Amortized


Estimated


Amortized


EstimatedCost


Fair Value


Cost


Fair Value


Cost


Fair Value(In thousands)Debt securities:Government Sponsored Enterprises

$
120,062


$
113,656


$
120,633


$
119,646


$
130,986


$
126,638Municipal bonds


14,177



14,378



18,220



18,712



18,326



18,806Corporate and other debt securities


130,111



129,739



8,000



7,985







264,350



257,773



146,853



146,343



149,312



145,444Mortgage-backed securities:Federal Home Loan Mortgage
    Corporation


808,952



775,443



1,072,121



1,065,872



1,339,589



1,326,743Government National Mortgage
    Association


8,249



8,442



16,465



16,932



73,769



75,620Federal National Mortgage
    Association


527,338



507,462



612,556



611,801



694,302



693,223Federal housing authorities


3,189



3,442



3,336



3,775



1,525



1,525Non-agency securities


150,954



143,413



189,551



188,216



264,314



261,963Total mortgage-backed securities
    held-to-maturity


1,498,682



1,438,202



1,894,029



1,886,596



2,373,499



2,359,074Total securities
    held-to-maturity

$
1,763,032


$
1,695,975


$
2,040,882


$
2,032,939


$
2,522,811


$
2,504,518   Securities
    Available-for-Sale
  At June 30,2006


2005


2004Amortized


Estimated


Amortized


Estimated


Amortized


EstimatedCost


Fair Value


Cost


Fair Value


Cost


Fair Value(In thousands)Equity securities

$
35,000


$
35,035


$
35,000


$
34,825


$
56,875


$
56,931Mortgage-backed securities:Federal Home Loan Mortgage
    Corporation


124,845



120,764



156,162



155,106



422,859



416,902Federal National Mortgage
    Association


208,545



201,794



262,644



262,336



699,542



689,686Non-agency securities


178,446



171,283



223,861



221,684



261,129



257,554Total mortgage-backed securities
    available for sale


511,836



493,841



642,667



639,126



1,383,530



1,364,142Total securities
    available-for-sale

$
546,836


$
528,876


$
677,667


$
673,951


$
1,440,405


$
1,421,073  15




---



##### Table of Contents



Portfolio Maturities and Yields.
  More Than One Year


More Than Five YearsOne Year or Less


through Five Years


through Ten Years


More Than Ten Years


Total SecuritiesWeighted





Weighted





Weighted





Weighted








WeightedAmortized


Average


Amortized


Average


Amortized


Average


Amortized


Average


Amortized





AverageCost


Yield


Cost


Yield


Cost


Yield


Cost


Yield


Cost


Fair Value


Yield(Dollars in thousands)Held to Maturity:Debt securities:Government Sponsored Enterprises

$





%

$
30,000



3.91
%

$
89,120



4.63
%

$
942



5.75
%

$
120,062


$
113,656



4.46
%Municipal bonds







%


3,015



6.35
%


5,292



7.16
%


5,870



8.85
%


14,177



14,378



7.69
%Corporate and other debt securities







%







%







%


130,111



6.73
%


130,111



129,739



6.73
%




%


33,015



4.13
%


94,412



4.77
%


136,923



6.82
%


264,350



257,773



5.75
%Mortgage-backed securities:Federal Home Loan Mortgage
    Corporation


795



6.00
%







%


67,084



4.56
%


741,073



4.48
%


808,952



775,443



4.49
%Government National Mortgage
    Association







%







%







%


8,249



7.12
%


8,249



8,442



7.12
%Federal National Mortgage
    Association







%







%


56,884



5.41
%


470,454



4.97
%


527,338



507,462



5.01
%Federal and state housing
    authorities







%







%


1,832



8.88
%


1,357



8.90
%


3,189



3,442



8.89
%Non-agency securities







%







%







%


150,954



4.86
%


150,954



143,413



4.86
%Total mortgage-backed securities


795



6.00
%







%


125,800



5.01
%


1,372,087



4.71
%


1,498,682



1,438,202



4.73
%Total securities
    held-to-maturity

$
795



6.00
%

$
33,015



4.13
%

$
220,212



4.91
%

$
1,509,010



4.90
%

$
1,763,032


$
1,695,975



4.89
%Available for Sale:Equity securities

$





%

$





%

$





%

$
35,000



5.20
%

$
35,000


$
35,035



5.20
%Mortgage-backed securities:Federal Home Loan Mortgage
    Corporation







%







%


29,214



4.00
%


95,631



4.19
%


124,845



120,764



4.14
%Federal National Mortgage
    Association







%







%


60,770



4.00
%


147,775



4.01
%


208,545



201,794



4.01
%Non-agency securities







%







%







%


178,446



4.65
%


178,446



171,283



4.65
%Total mortgage-backed securities







%







%


89,984



4.00
%


421,852



4.32
%


511,836



493,841



4.26
%Total securities
    available-for-sale

$





%

$





%

$
89,984



4.00
%

$
456,852



4.39
%

$
546,836


$
528,876



4.32
%   Sources
    of Funds
  General.
 16




---



##### Table of Contents



Deposits.
        At June 30,2006


2005


2004Percent of


Weighted





Percent of


Weighted





Percent of


WeightedTotal


Average





Total


Average





Total


AverageBalance


Deposits


Rate


Balance


Deposits


Rate


Balance


Deposits


Rate(Dollars in thousands)Savings

$
226,245



6.85
%


0.83
%

$
271,071



8.36
%


0.83
%

$
289,682



8.87
%


0.84
%Checking accounts


349,014



10.57



2.08



277,317



8.56



1.30



232,900



7.13



0.96Money market deposits


212,200



6.43



1.56



318,432



9.83



1.32



410,855



12.58



1.34Total transaction accounts


787,459



23.85



1.58



866,820



26.75



1.16



933,437



28.58



1.10Certificates of deposit


2,514,584



76.15



4.06



2,373,600



73.25



2.87



2,333,498



71.42



2.29Total deposits

$
3,302,043



100.00
%


3.47
%

$
3,240,420



100.00
%


2.42
%

$
3,266,935



100.00
%


1.95
%  17




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##### Table of Contents



At June 30,2006


2005


2004(Dollars in thousands)Certificates of
    DepositsLess than 2%

$
32,225


$
446,421


$
1,423,2602.01% - 3.00%


116,330



757,576



510,9323.01% - 4.00%


870,358



987,320



307,8004.01% - 5.00%


1,325,226



162,270



71,393Over 5.00%


170,445



20,013



20,113Total

$
2,514,584


$
2,373,600


$
2,333,498     Within


Over


Over Six


Over One


Over Two


OverThree


Three to


Months to


Year to


Years to


ThreeMonths


Six Months


One Year


Two Years


Three Years


Years


Total(Dollars in thousands)Certificates of
    DepositsLess than 2%

$
31,906


$
252


$
57


$
10


$



$



$
32,2252.01% - 3.00%


66,097



15,770



30,934



3,519



2



8



116,3303.01% - 4.00%


186,390



200,099



205,263



145,849



131,044



1,713



870,3584.01% - 5.00%


506,384



370,983



268,061



55,289



24,944



99,565



1,325,226Over 5.00%


332



11,936



18,787



123,054



183



16,153



170,445Total

$
791,109


$
599,040


$
523,102


$
327,721


$
156,173


$
117,439


$
2,514,584     AtJune 30,2006(In thousands)Three months or less

$
182,986Over three months through six
    months


135,776Over six months through one year


102,748Over one year


126,921Total

$
548,431   Borrowings.
   18




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##### Table of Contents



At or for the Years Ended June 30,2006


2005


2004(Dollars in thousands)Balance at end of period

$
150,740


$
88,769


$
798Average balance during period


107,317



25,402



812Maximum outstanding at any month
    end


190,255



88,769



824Weighted average interest rate at
    end of period


5.36
%


3.49
%


1.98
%Average interest rate during period


4.30
%


2.80
%


1.98
%     At or for the Years Ended June 30,2006


2005


2004(Dollars in thousands)Balance at end of period

$
1,095,000


$
1,225,000


$
1,604,000Average balance during period


1,008,406



1,475,269



1,729,818Maximum outstanding at any month
    end


1,160,000



1,673,000



1,859,000Weighted average interest rate at
    end of period


4.69
%


3.53
%


3.80
%Average interest rate during period


4.03
%


3.80
%


3.59
%   Subsidiary
    Activities
    ISB Mortgage Company LLC.
    ISB Asset Corporation.
    ISB Holdings, Inc.
    Personnel
   19




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##### Table of Contents



SUPERVISION
    AND REGULATION
  General
        Form 10-K.
  New
    Jersey Banking Regulation
  Activity Powers.
  
    real estate mortgages;
    consumer and commercial loans;
    specific types of debt securities, including certain corporate
    debt securities and obligations of federal, state and local
    governments and agencies;
    certain types of corporate equity securities; and
    certain other assets.  out-of-state out-of-state
 20




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##### Table of Contents



Loans-to-One-Borrower
    Limitations. loans-to-one-borrower
  Dividends.
  Minimum Capital
    Requirements.
  Examination and Enforcement.
  Federal
    Banking Regulation
  Capital Requirements.
    
    common stockholders equity, excluding the unrealized
    appreciation or depreciation, net of tax, from available for
    sale securities;
    non-cumulative perpetual preferred stock, including any related
    retained earnings; and
    minority interests in consolidated subsidiaries minus all
    intangible assets, other than qualifying servicing rights and
    any net unrealized loss on marketable equity securities.    
    cumulative perpetual preferred stock;
    certain perpetual preferred stock for which the dividend rate
    may be reset periodically;
    hybrid capital instruments, including mandatory convertible
    securities;
    term subordinated debt;
    intermediate term preferred stock;
    allowance for loan losses; and
    up to 45% of pretax net unrealized holding gains on available
    for sale equity securities with readily determinable fair market
    values. 21




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##### Table of Contents



case-by-case
  
    the quality of the banks interest rate risk management
    process;
    the overall financial condition of the bank; and
    the level of other risks at the bank for which capital is needed.    As of June 30, 2006Historical


Percent ofCapital


Assets(1)(Dollars in thousands)Core capital

$
656,801



12.25
%Tier 1 risk-based capital


656,801



26.23Total risk-based capital


663,141



26.48     (1)
    
    For purposes of calculating Core capital, assets are based on
    adjusted total leverage assets. In calculating Tier 1
    risk-based capital and total risk-based capital, assets are
    based on total risk-weighted assets.    Activity Restrictions on State-Chartered
    Banks.
     22




---



##### Table of Contents



Federal Home Loan Bank
    System.
    Enforcement.
  Prompt Corrective Action.
 23




---



##### Table of Contents




    its ratio of total capital to risk-weighted assets is at least
    10%;
    its ratio of Tier 1 capital to risk-weighted assets is at
    least 6%; and
    its ratio of Tier 1 capital to total assets is at least 5%,
    and it is not subject to any order or directive by the FDIC to
    meet a specific capital level.    
    its ratio of total capital to risk-weighted assets is at least
    8%; or
    its ratio of Tier 1 capital to risk-weighted assets is at
    least 4%; and
    its ratio of Tier 1 capital to total assets is at least 4%
    (3% if the bank receives the highest rating under the Uniform
    Financial Institutions Rating System) and it is not a
    well-capitalized institution.    
    its total risk-based capital is less than 8%; or
    its Tier 1 risk-based-capital is less than 4%; and
    its leverage ratio is less than 4%.    
    its total risk-based capital is less than 6%;
    its Tier 1 capital is less than 3%; or
    its leverage ratio is less than 3%.      
    insolvency, or when a assets of the bank are less than its
    liabilities to depositors and others;
    substantial dissipation of assets or earnings through violations
    of law or unsafe or unsound practices;
    existence of an unsafe or unsound condition to transact business;
    likelihood that the bank will be unable to meet the demands of
    its depositors or to pay its obligations in the normal course of
    business; and
    insufficient capital, or the incurring or likely incurring of
    losses that will deplete substantially all of the
    institutions capital with no reasonable prospect of
    replenishment of capital without federal assistance.    Deposit Insurance.
   24




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##### Table of Contents



Transactions with Affiliates of Investors Savings
    Bank.
    
    limits the extent to which a bank or its subsidiaries may engage
    in covered transactions with any one affiliate to an
    amount equal to 10% of such banks capital stock and
    retained earnings, and limits all such transactions with all
    affiliates to an amount equal to 20% of such capital stock and
    retained earnings; and
    requires that all such transactions be on terms that are
    consistent with safe and sound banking practices.    Prohibitions Against Tying
    Arrangements.
  Privacy Standards.
     25




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##### Table of Contents



Community Reinvestment Act and Fair Lending
    Laws.
  
    a lending test, to evaluate the institutions record of
    making loans in its service areas;
    an investment test, to evaluate the institutions record of
    investing in community development projects, affordable housing,
    and programs benefiting low or moderate income individuals and
    businesses; and
    a service test, to evaluate the institutions delivery of
    services through its branches, ATMs and other offices.      Loans to
    a Banks Insiders
  Federal Regulation. loans-to-one-borrower loans-to-one-borrower Loans-to-One
     26




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##### Table of Contents



New Jersey Regulation.
  Federal
    Reserve System
    The USA
    Patriot Act
    Sarbanes-Oxley
    Act of 2002
    Holding
    Company Regulation
  Federal Regulation.
 27




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##### Table of Contents




    making or servicing loans;
    performing certain data processing services;
    providing discount brokerage services; or acting as fiduciary,
    investment or financial advisor;
    leasing personal or real property;
    making investments in corporations or projects designed
    primarily to promote community welfare; and
    acquiring a savings and loan association.    
    each of its depository institution subsidiaries is well
    capitalized;
    each of its depository institution subsidiaries is well
    managed; 28




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##### Table of Contents




    each of its depository institution subsidiaries has at least a
    satisfactory Community Reinvestment Act rating at
    its most recent examination; and
    the bank holding company has filed a certification with the
    Federal Reserve Board stating that it elects to become a
    financial holding company.        Conversion of Investors Bancorp, MHC to Stock
    Form.
    New Jersey Regulation.
  Acquisition of Investors Bancorp,
    Inc.
 29




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##### Table of Contents



Federal Securities Laws.
    TAXATION
  Federal
    Taxation
  General.
  Method of Accounting.
  Bad Debt Reserves.
    Taxable Distributions and
    Recapture.
    Alternative Minimum Tax.
  Net Operating Loss Carryovers.
 30




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##### Table of Contents



Corporate Dividends-Received
    Deduction.
  State
    Taxation
  New Jersey State Taxation.
      Delaware State Taxation.
  ITEM 1A.
    RISK
    FACTORS  Our
    Liabilities Reprice Faster Than Our Assets and Future Increases
    in Interest Rates Will Reduce Our Profits.
    
    the interest income we earn on our interest-earning assets, such
    as loans and securities; and
    the interest expense we pay on our interest-bearing liabilities,
    such as deposits and borrowings.   31




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##### Table of Contents



and/or
  available-for-sale
    There Is
    No Assurance That Our Strategy to Change the Mix of Our Assets
    and Liabilities Will Succeed.
    Our
    Inability to Achieve Profitability on New Branches May
    Negatively Affect Our Earnings.
  de novo
  Because
    We Intend to Continue to Increase Our Commercial Real Estate
    Originations, Our Lending Risk Will Increase.
   32




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##### Table of Contents



A
    Downturn in the New Jersey Economy or a Decline in Real Estate
    Values Could Reduce Our Profits.
    If Our
    Allowance for Loan Losses is Not Sufficient to Cover Actual Loan
    Losses, Our Earnings Could Decrease.
      Our
    Return on Equity Will Be Low Compared to Other Financial
    Institutions. This Could Negatively Affect the Price of Our
    Common Stock.
    Strong
    Competition Within Our Market Area May Limit Our Growth and
    Profitability.
   33




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##### Table of Contents



If We
    Declare Dividends on Our Common Stock, Investors Bancorp, MHC
    Will be Prohibited From Waiving the Receipt of Dividends by
    Current Federal Reserve Board Policy, Which May Result in Lower
    Dividends for All Other Stockholders.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   34




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##### Table of Contents



PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED
    STOCKHOLDERMATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES    Fiscal 2006

High


Low


DividendsQuarter ended December 31,
    2005

$
11.07


$
9.89


$
Quarter ended March 31, 2006


14.49



10.99



Quarter ended June 30, 2006


14.00



12.75



            35




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA    At June 30,Selected Financial Condition Data:

2006


2005


2004


2003


2002(In thousands)(Unaudited)Total assets

$
5,497,246


$
4,992,753


$
5,318,140


$
5,352,404


$
5,215,179Loans receivable, net


2,960,583



1,993,904



1,105,881



778,451



992,910Loans
    held-for-sale


974



3,412



1,428



10,991



2,601Securities held to maturity, net


1,763,032



2,040,882



2,522,811



3,851,921



3,830,055Securities available for sale, at
    estimated fair value


528,876



673,951



1,421,073



303,525



117,060Bank owned life insurance


78,903



76,229



75,543



74,541



37,461Deposits


3,302,043



3,240,420



3,266,935



3,172,826



2,834,420Borrowed funds


1,245,740



1,313,769



1,604,798



1,744,827



1,969,855Stockholders equity


900,187



407,827



401,663



392,537



365,221   Years Ended June 30,Selected Operating Data:

2006(1)


2005(2)


2004


2003


2002(In thousands)Interest and dividend income

$
246,068


$
226,524


$
210,574


$
241,238


$
283,095Interest expense


141,796



126,679



127,558



158,121



185,339Net interest income


104,272



99,845



83,016



83,117



97,756Provision for loan losses


600



600



600



600



500Net interest income after
    provision for loan losses


103,672



99,245



82,416



82,517



97,256Other income (loss)


5,580



(2,431
)


3,890



7,138



(302
)Operating expenses


86,830



103,302



54,803



49,153



40,992Income (loss) before income tax
    expense (benefit)


22,422



(6,488
)


31,503



40,502



55,962Income tax expense (benefit)


7,408



(3,346
)


11,666



12,232



20,093Net income (loss)

$
15,014


$
(3,142
)

$
19,837


$
28,270


$
35,869Earnings per share basic and
    diluted(3)


0.06



n/a



n/a



n/a



n/a     (1)
    
    June 30, 2006 year end results reflect a pre-tax
    expense of $20.7 million for the charitable contribution
    made to Investors Savings Bank Charitable Foundation as part of
    our IPO.(2)
    
    June 30, 2005 year end results reflect pre-tax expense
    of $54.0 million attributable to the March 2005 balance
    sheet restructuring.(3)
    
    Basic earnings per share for the year ended June 30, 2006
    include the results of operations from October 11, 2005,
    the date the Company completed its initial public offering.  36




---



##### Table of Contents



At or for the Years Ended June 30,Selected Financial Ratios and Other Data:

2006


2005


2004


2003


2002Performance Ratios:Return on assets (ratio of net
    income or loss to average total assets)


0.29
%


(0.06
)%


0.37
%


0.52
%


0.71
%Return on equity (ratio of net
    income or loss to average equity)


2.00
%


(0.78
)%


5.00
%


7.56
%


10.65
%Net interest rate spread(1)


1.62
%


1.79
%


1.42
%


1.37
%


1.73
%Net interest margin(2)


2.04
%


1.97
%


1.58
%


1.56
%


1.97
%Efficiency ratio(3)


79.04
%


106.04
%


63.06
%


54.46
%


42.06
%Operating expenses to average
    total assets


1.65
%


1.98
%


1.02
%


0.90
%


0.81
%Average interest-earning assets to
    average interest-bearing liabilities


1.15
x


1.07
x


1.06
x


1.06
x


1.07xAsset Quality Ratios:Non-performing assets to total
    assets


0.06
%


0.16
%


0.17
%


0.20
%


0.24
%Non-performing loans to total loans


0.11
%


0.40
%


0.82
%


1.37
%


1.21
%Allowance for loan losses to
    non-performing loans


192.18
%


72.40
%


57.29
%


44.40
%


35.82
%Allowance for loan losses to total
    loans


0.22
%


0.29
%


0.47
%


0.61
%


0.43
%Capital Ratios:Risk-based capital (to
    risk-weighted assets)(4)


26.48
%


21.48
%


26.55
%


27.58
%


26.88
%Tier I risk-based capital (to
    risk-weighted assets)(4)


26.23
%


21.18
%


26.22
%


27.24
%


26.56
%Core capital (to average assets)(4)


12.25
%


8.28
%


7.69
%


7.12
%


6.95
%Equity to total assets


16.38
%


8.17
%


7.55
%


7.33
%


7.00
%Average equity to average assets


14.29
%


7.69
%


7.36
%


6.86
%


6.66
%Tangible capital (to tangible
    assets)


16.36
%


8.16
%


7.52
%


7.30
%


6.97
%Other Data:Number of full service offices


46



46



45



45



43Full time equivalent employees


473



459



443



455



420     (1)
    
    The net interest rate spread represents the difference between
    the weighted-average yield on interest-earning assets and the
    weighted- average cost of interest-bearing liabilities for the
    period.(2)
    
    The net interest margin represents net interest income as a
    percent of average interest-earning assets for the period.(3)
    
    The efficiency ratio represents operating expenses divided by
    the sum of net interest income and other income.(4)
    
    Ratios are for Investors Savings Bank and do not include capital
    retained at the holding company level.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Business
    Strategy
     37




---



##### Table of Contents



38




---



##### Table of Contents



Critical
    Accounting Policies
    Allowance for Loan Losses.
         39




---



##### Table of Contents



Deferred Income Taxes.
  Asset Impairment Judgments. other-than-temporary
  available-for-sale held-to-maturity
 40




---



##### Table of Contents



other-than-temporary. other-than-temporary,
  Comparison
    of Financial Condition at June 30, 2006 and June 30,
    2005
  Total Assets.
  Cash and Cash Equivalents.
  Securities. available-for-sale held-to-maturity,
  Net Loans.
       41




---



##### Table of Contents



and/or
  Stock in the Federal Home Loan Bank and Other
    Assets.
  Deposits.
  Borrowed Funds.
  Stockholders
    Equity.
  Analysis
    of Net Interest Income
   42




---



##### Table of Contents



Average Balances and Yields.
  For the Years Ended June 30,2006


2005


2004Average


Interest


Average


Average


Interest


Average


Average


Interest


AverageOutstanding


Earned/


Yield/


Outstanding


Earned/


Yield/


Outstanding


Earned/


Yield/Balance


Paid


Rate


Balance


Paid


Rate


Balance


Paid


Rate(Dollars in thousands)Interest-earning
    assets:Interest-bearing deposits

$
82,677


$
2,863



3.46
%

$
20,162


$
489



2.43
%

$
106,909


$
866



0.81
%Repurchase agreements


16,387



613



3.74























Securities
    available-for-sale(1)


609,265



25,828



4.24



1,190,712



47,408



3.98



1,186,174



49,912



4.21Securities
    held-to-maturity


1,930,206



87,202



4.52



2,289,520



99,443



4.34



2,966,858



110,945



3.74Net loans


2,427,506



126,613



5.22



1,502,704



76,857



5.11



899,219



47,709



5.31Stock in FHLB


54,834



2,949



5.38



72,388



2,327



3.21



87,269



1,142



1.31Total interest-earning assets


5,120,875



246,068



4.81



5,075,486



226,524



4.46



5,246,429



210,574



4.01Non-interest-earning assets


135,799











139,856











145,780Total assets

$
5,256,674










$
5,215,342










$
5,392,209Interest-bearing
    liabilities:Savings deposits

$
330,840



2,820



0.85


$
279,953



2,349



0.84


$
276,466



2,576



0.93Interest-bearing checking


306,079



6,027



1.97



218,327



2,533



1.16



194,374



2,087



1.07Money market accounts


255,154



3,423



1.34



380,623



5,075



1.33



390,927



5,231



1.34Certificates of deposit


2,435,089



84,308



3.46



2,364,399



59,905



2.53



2,334,815



55,551



2.38Borrowed funds


1,115,723



45,218



4.05



1,500,671



56,817



3.79



1,730,630



62,113



3.59Total interest-bearing liabilities


4,442,885



141,796



3.19



4,743,973



126,679



2.67



4,927,212



127,558



2.59Non-interest-bearing liabilities


62,803











70,468











68,213Total liabilities


4,505,688











4,814,441











4,995,425Stockholders equity


750,986











400,901











396,784Total liabilities and
    stockholders equity

$
5,256,674










$
5,215,342










$
5,392,209Net interest income





$
104,272










$
99,845










$
83,016Net interest rate spread(2)










1.62
%










1.79
%










1.42
%Net interest-earning assets(3)

$
677,990










$
331,513










$
319,217Net interest margin(4)










2.04
%










1.97
%










1.58
%Ratio of interest-earning assets to
    total interest-bearing liabilities


1.15
x










1.07
x










1.06x     (1)
    
    Securities
    available-for-sale
    stated at amortized cost, adjusted for unamortized purchased
    premiums and discounts.(2)
    
    Net interest rate spread represents the difference between the
    yield on average interest-earning assets and the cost of average
    interest-bearing liabilities.(3)
    
    Net interest-earning assets represent total interest-earning
    assets less total interest-bearing liabilities.(4)
    
    Net interest margin represents net interest income divided by
    average total interest-earning assets. 43




---



##### Table of Contents



Rate/Volume
    Analysis
    Years Ended June 30,


Years Ended June 30,2006 vs. 2005


2005 vs. 2004Increase (Decrease)


Total


Increase (Decrease)


TotalDue to


Increase


Due to


IncreaseVolume


Rate


(Decrease)


Volume


Rate


(Decrease)(In thousands)Interest-earning
    assets:Interest-bearing deposits

$
2,086


$
288


$
2,374


$
(1,108
)

$
731


$
(377
)Repurchase agreements


613







613











Securities
    available-for-sale


(23,464
)


1,884



(21,580
)


137



(2,641
)


(2,504
)Securities
    held-to-maturity


(14,705
)


2,464



(12,241
)


(27,527
)


16,025



(11,502
)Net loans


48,202



1,554



49,756



30,701



(1,553
)


29,148Stock in FHLB


(665
)


1,287



622



(224
)


1,409



1,185Total interest-earning assets


12,067



7,477



19,544



1,979



13,971



15,950Interest-bearing
    liabilities:Savings deposits


433



38



471



32



(259
)


(227
)Interest-bearing checking


1,278



2,216



3,494



270



176



446Money market accounts


(1,683
)


31



(1,652
)


(137
)


(19
)


(156
)Certificates of deposit


1,841



22,562



24,403



711



3,643



4,354Total Deposits


1,869



24,847



26,716



876



3,541



4,417Borrowed funds


(15,286
)


3,687



(11,599
)


(8,840
)


3,544



(5,296
)Total interest-bearing liabilities


(13,417
)


28,534



15,117



(7,964
)


7,085



(879
)Increase (decrease) in net
    interest income

$
25,484


$
(21,057
)

$
4,427


$
9,943


$
6,886


$
16,829   Comparison
    of Operating Results for the Years Ended June 30, 2006 and
    2005
  Net Income.
  Net Interest Income.
 44




---



##### Table of Contents



Interest and Dividend Income.
      Interest Expense.
      Provision for Loan Losses.
  Other Income (Loss).
  Operating Expenses.
 45




---



##### Table of Contents



Income Taxes.
  Comparison
    of Operating Results for the Years Ended June 30, 2005 and
    2004
  Net Income (Loss).
  Net Interest Income.
  Interest and Dividend Income.
      Interest Expense.
     46




---



##### Table of Contents



Provision for Loan Losses.
  Other Income (Loss). other-than-temporary
  Operating Expenses.
  Income Taxes.
  Management
    of Market Risk
  Qualitative Analysis.
   47




---



##### Table of Contents



shorter-to-medium
        Quantitative Analysis.
  Net Interest IncomeChange in


Net Portfolio Value(2)


Estimated NetInterest Rates





Estimated Increase (Decrease)


Interest


Increase (Decrease) in Estimated Net Interest Income(Basis Points)(1)


Estimated NPV


Amount


Percent


Income(3)


Amount


Percent(Dollars in thousands)+200bp


$
548,840


$
(276,093
)


(33.47
)%

$
76,442


$
(14,429
)


(15.88
)%0bp



824,933











90,871







-200bp



988,208



163,275



19.79
%


105,382



14,511



15.97
%     (1)
    
    Assumes an instantaneous uniform change in interest rates at all
    maturities.(2)
    
    NPV is the discounted present value of expected cash flows from
    assets, liabilities and off-balance sheet contracts.(3)
    
    Assumes a gradual change in interest rates over a one year
    period at all maturities 48




---



##### Table of Contents



Liquidity
    and Capital Resources
        available-for-sale,
  12-month
     49




---



##### Table of Contents



Off-Balance
    Sheet Arrangements and Aggregate Contractual
    Obligations
  Off-Balance Sheet Arrangements.
  Contractual Obligations.
    Payments Due by PeriodLess Than


One to


Three to


More ThanContractual Obligations

One Year


Three Years


Five Years


Five Years


Total(In thousands)Federal Home Loan Bank
    advances(1)

$
150,000


$
104


$



$
636


$
150,740Repurchase agreements(1)


700,000



145,000



250,000







1,095,000Operating leases


3,535



6,529



5,953



23,515



39,532Total

$
853,535


$
151,633


$
255,953


$
24,151


$
1,285,272     (1)
    
    Reflects all debt with a maturity of longer than one year. 50




---



##### Table of Contents



Recent
    Accounting Pronouncements
  No. FAS 115-1 FAS 124-1, Other-Than-Temporary other-than-temporary other-than-temporary No. 03-1 other-than-temporary other-than-temporary
  fair-value-based
       51




---



##### Table of Contents



Impact of
    Inflation and Changing Prices
    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK  Item 7-
  ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Form 10-K.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE   ITEM 9A.  CONTROLS
    AND PROCEDURES  Rule 13a-15(e) 15d-15(e)
       ITEM 9B.  OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT   52




---



##### Table of Contents



ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS      ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES   53




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
             
    54




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Consolidated
    Balance Sheets
 June 30,
    2006 and 2005
  2006


2005(In thousands)AssetsCash and cash equivalents

$
39,824


$
81,329Securities
    available-for-sale,
    at estimated fair value (notes 5 and 11)


528,876



673,951Securities
    held-to-maturity,
    net (estimated fair value of $1,695,975 and $2,032,939 at
    June 30, 2006 and June 30, 2005, respectively)
    (notes 4 and 11)


1,763,032



2,040,882Loans receivable, net (note 6)


2,960,583



1,993,904Loans
    held-for-sale


974



3,412Stock in the Federal Home
    Loan Bank (note 11)


46,125



60,688Accrued interest receivable
    (note 7)


21,053



18,263Office properties and equipment,
    net (note 9)


27,911



29,544Net deferred tax asset
    (note 12)


28,176



13,128Bank owned life insurance contract
    (note 3)


78,903



76,229Other assets


1,789



1,423$
5,497,246


$
4,992,753Liabilities and
    Stockholders EquityLiabilities:Deposits (note 10)

$
3,302,043



3,240,420Borrowed funds (note 11)


1,245,740



1,313,769Advance payments by borrowers for
    taxes and insurance


15,337



10,817Other liabilities


33,939



19,920Total liabilities


4,597,059



4,584,926Stockholders equity
    (notes 2 and 16):Preferred stock, $0.01 par
    value, 500,000 authorized shares; none issued






Common stock, $0.01 par
    value, 200,000,000 shares authorized; 116,275,688 issued
    and outstanding at June 30, 2006, and $0.10 par value,
    3,000 shares authorized; 50 issued and outstanding at
    June 30, 2005


532



Additional paid-in capital


524,962



25Retained earnings


426,233



411,219Unallocated common stock held by
    the employee stock ownership plan


(40,414
)


Accumulated other comprehensive
    loss:Net unrealized loss on securities
    available for sale, net of tax


(10,758
)


(2,316
)Minimum pension liability, net of
    tax


(368
)


(1,101
)(11,126
)


(3,417
)Total stockholders equity


900,187



407,827Commitments and contingencies
    (notes 8 and 14)Total liabilities and
    stockholders equity

$
5,497,246


$
4,992,753    55




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Consolidated
    Statements of Operations
 Years
    ended June 30, 2006, 2005 and 2004
  2006


2005


2004(In thousands, except per share data)Interest and dividend income:Loans receivable and loans
    held-for-sale

$
126,613


$
76,857


$
47,709Securities:Government-sponsored enterprise
    obligations


6,843



5,496



5,851Mortgage-backed securities


97,557



138,210



151,850Equity securities
    available-for-sale


1,825



1,776



1,523Municipal bonds and other debt


6,805



1,369



1,633Interest-bearing deposits


2,863



489



866Repurchase agreements


613







Federal Home Loan Bank stock


2,949



2,327



1,142Total interest and dividend income


246,068



226,524



210,574Interest expense:Deposits (note 10)


96,578



69,862



65,445Secured borrowings


45,218



56,817



62,113Total interest expense


141,796



126,679



127,558Net interest income


104,272



99,845



83,016Provision for loan losses
    (note 6)


600



600



600Net interest income after provision
    for loan losses


103,672



99,245



82,416Other income (loss):Fees and service charges


2,524



2,451



2,319Increase and death benefits on bank
    owned life insurance contract (note 3)


2,674



3,977



1,002Gain on sales of mortgage loans, net


289



406



814Gain (loss) on securities
    transactions, net (notes 4 and 5)


5



(9,494
)


2,824Loss on securities due to
    other-than-temporary
    decline in fair value (note 5)










(3,094
)Gain on sale of other real estate
    owned, net


5



38



25Other income


83



191



Total other income (loss)


5,580



(2,431
)


3,890Operating expenses:Compensation and fringe benefits
    (note 13)


41,963



35,695



31,578Advertising and promotional expense


2,502



2,636



1,914Office occupancy and equipment
    expense (notes 9 and 14)


10,306



10,340



9,517Federal insurance premiums


470



470



490Stationery, printing, supplies and
    telephone


1,756



1,711



1,734Legal, audit, accounting, and
    supervisory examination fees


1,746



1,456



997Data processing service fees


3,633



3,340



3,491Amortization of premium on deposit
    acquisition






1,102



1,946Loss on early extinguishment of
    debt (note 11)






43,616



Contribution to charitable
    foundation (note 2)


20,651







Other operating expenses


3,803



2,936



3,136Total operating expenses


86,830



103,302



54,803Income (loss) before income tax
    expense (benefit)


22,422



(6,488
)


31,503Income tax expense (benefit)
    (note 12)


7,408



(3,346
)


11,666Net income (loss)

$
15,014


$
(3,142
)

$
19,837Earnings per share 
    basic and diluted (from October 11, 2005 to June 30,
    2006) (note 19)

$
0.06



n/a



n/a    56




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Consolidated
    Statements of Stockholders Equity
 Years
    ended June 30, 2006, 2005 and 2004
  Accumulated OtherComprehensive LossAdditional





Unallocated


Unrealized


Minimum


TotalCommon


Paid-in


Retained


Common Stock


Losses on


Pension


StockholdersStock


Capital


Earnings


Held by ESOP


Securities


Liability


EquityBalance at June 30, 2003

$



$
25


$
394,524


$



$
(1,162
)

$
(850
)

$
392,537Comprehensive income:Net income










19,837















19,837Change in minimum pension
    liability, net of tax expense of $64






















95



95Unrealized loss on securities
    available-
    for-sale,
    net of tax benefit of $7,163


















(12,726
)






(12,726
)Reclassification adjustment for
    losses included in net income, net of tax of $551


















1,920







1,920Total comprehensive income


























9,126Balance at June 30, 2004






25



414,361







(11,968
)


(755
)


401,663Comprehensive income:Net loss










(3,142
)














(3,142
)Change in minimum pension
    liability, net of tax benefit of $234






















(346
)


(346
)Unrealized gain on securities
    available-
    for-sale,
    net of tax expense of $2,307


















3,212







3,212Reclassification adjustment for
    losses included in net income, net of tax of $3,656


















6,440







6,440Total comprehensive income


























6,164Balance at June 30, 2005






25



411,219







(2,316
)


(1,101
)


407,827Comprehensive income:Net income










15,014















15,014Change in minimum pension
    liability, net of tax expense of $490






















733



733Unrealized loss on securities
    available-
    for-sale,
    net of tax benefit of $5,802


















(8,442
)






(8,442
)Total comprehensive income


























7,305Sale of 53,175,907 shares of
    common stock in the initial public offering and issuance of
    63,099,781 shares to mutual holding company


532



524,642



















525,174Purchase of common stock by the ESOP














(42,541
)










(42,541
)ESOP shares allocated or committed
    to be released






295







2,127











2,422Balance at June 30, 2006

$
532


$
524,962


$
426,233


$
(40,414
)

$
(10,758
)

$
(368
)

$
900,187    57




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Consolidated
    Statements of Cash Flows
 Years
    ended June 30, 2006, 2005 and 2004
  2006


2005


2004(In thousands)Cash flows from operating
    activities:Net income (loss)

$
15,014


$
(3,142
)

$
19,837Adjustments to reconcile net income
    (loss) to net cash provided by operating activities:Contribution of stock to charitable
    foundation


15,488







ESOP shares allocated or committed
    to be released


2,422







Amortization of premiums and
    accretion of discounts on securities, net


1,441



5,542



22,690Amortization of premium on deposit
    acquisition






1,102



1,946Provision for loan losses


600



600



600Depreciation and amortization of
    office properties and equipment


2,883



2,807



2,304(Gain) loss on securities
    transactions, net


(5
)


9,494



(2,824
)Loss on securities due to
    other-than-temporary
    decline in fair value










3,094Loss on early extinguishment of debt






43,616



Mortgage loans originated for sale


(28,355
)


(53,548
)


(51,021
)Proceeds from mortgage loan sales


31,082



51,970



61,398Gain on sales of mortgage loans, net


(289
)


(406
)


(814
)Proceed from sales of other real
    estate owned


5



315



135Net gain on sales of other real
    estate owned


(5
)


(38
)


(25
)Death benefits on bank owned life
    insurance contract






(2,800
)


Increase in bank owned life
    insurance contract


(2,674
)


(1,177
)


(1,002
)(Increase) decrease in accrued
    interest


(2,790
)


4,398



2,394Deferred tax benefit


(9,735
)


(69
)


(1,979
)Decrease in other assets


856



570



350Increase (decrease) in other
    liabilities


14,019



(18,201
)


1,168Total adjustments


24,943



44,175



38,414Net cash provided by operating
    activities


39,957



41,033



58,251Cash flows from investing
    activities:Originations of loans


(489,021
)


(284,903
)


(285,996
)Purchases of loans


(824,843
)


(846,871
)


(331,578
)Payments on loans


346,585



243,028



289,389Purchases of mortgage-backed
    securities
    held-to-maturity


(64,356
)


(261,064
)


(863,170
)Purchases of debt securities
    held-to-maturity


(346,005
)


(23,000
)


(25,000
)Purchases of mortgage-backed
    securities
    available-for-sale






(62,175
)


(1,436,645
)Proceeds from paydowns/maturities
    on mortgage-backed securities
    held-to-maturity


457,351



689,885



2,035,506Proceeds from calls/maturities on
    debt securities
    held-to-maturity


229,495



25,351



27,218Proceeds from paydowns/maturities
    on mortgage-backed securities
    available-for-sale


130,760



242,890



267,196Proceeds from sales of
    mortgage-backed securities
    held-to-maturity






46,942



135,688Proceeds from sales of
    mortgage-backed securities
    available-for-sale






550,071



30,390Proceeds from sales of equity
    securities
    available-for-sale






20,729



Proceeds from redemptions of
    Federal Home Loan Bank stock


87,748



82,376



17,001Purchases of Federal Home
    Loan Bank stock


(73,185
)


(61,074
)


(11,749
)Purchases of office properties and
    equipment


(1,250
)


(5,403
)


(6,406
)Proceeds from death benefits on
    bank owned life insurance contract






3,291



Net cash (used in) provided by
    investing activities


(546,721
)


360,073



(158,156
)Cash flows from financing
    activities:Net increase (decrease) in deposits


61,623



(26,515
)


94,109Net proceeds from sale of common
    stock


509,686







Loan to ESOP for purchase of common
    stock


(42,541
)






Net increase (decrease) in funds
    borrowed under short-term repurchase agreements


325,000







(140
)Proceeds from funds borrowed under
    other repurchase agreements


475,000



605,000



115,000Repayments of funds borrowed under
    other repurchase agreements


(930,000
)


(1,027,616
)


(255,000
)Net increase (decrease) in Federal
    Home Loan Bank advances


61,971



87,971



(29
)Net increase in advance payments by
    borrowers for taxes and insurance


4,520



3,730



1,773Net cash provided by (used in)
    financing activities


465,259



(357,430
)


(44,287
)Net (decrease) increase in cash and
    cash equivalents


(41,505
)


43,676



(144,192
)Cash and cash equivalents at
    beginning of year


81,329



37,653



181,845Cash and cash equivalents at end of
    year

$
39,824


$
81,329


$
37,653Supplemental cash flow information:Noncash investing activities:Real estate acquired through
    foreclosure

$



$
123


$
154Cash paid during the year for:Interest


142,498



127,307



127,423Income taxes


9,052



16,388



12,993    58




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial Statements
 Years Ended June 30, 2006, 2005 and 2004
  (1)
    Summary
    of Significant Accounting Policies    (a)
    Basis
    of Presentation        (b)
    Business      (c)
    Cash
    Equivalents    (d)
    Securities  held-to-maturity available-for-sale.
  held-to-maturity available-for-sale Available-for-sale
 59




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
   available-for-sale held-to-maturity other-than-temporary other-than-temporary,
    (e)
    Loans
    Receivable, Net  held-for-sale, held-for-sale
        (f)
    Office
    Properties and Equipment, Net   60




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
   (g)
    Other
    Real Estate Owned    (h)
    Bank
    Owned Life Insurance Contract    (i)
    Intangible
    Asset    (j)
    Federal
    Home Loan Bank Stock    (k)
    Borrowed
    Funds      (l)
    Income
    Taxes    (m)
    Employee
    Benefits    and/or
 61




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
        No. 93-6,
  (n) Earnings
    Per Share
      (2)
    Stock
    Offering    (3)
    Bank
    Owned Life Insurance Contract   62




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
        No. 06-5, Bulletin No. 85-4
 63




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
   (4)
    Securities
    Held-to-Maturity  held-to-maturity
  June 30, 2006Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost


Gains


Losses


Fair Value(In thousands)Debt securities:Government-sponsored enterprises

$
120,062


$
12


$
6,418


$
113,656Municipal bonds


14,177



226



25



14,378Corporate and other debt securities


130,111



37



409



129,739264,350



275



6,852



257,773Mortgage-backed securities:Federal Home LoanMortgage Corporation


808,952



189



33,698



775,443Federal National Mortgage
    Association


527,338



583



20,459



507,462Government National Mortgage
    Association


8,249



203



10



8,442Federal housing authorities


3,189



253







3,442Non-agency securities


150,954







7,541



143,4131,498,682



1,228



61,708



1,438,202Total securities
    held-to-maturity

$
1,763,032


$
1,503


$
68,560


$
1,695,975   June 30, 2005Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost


Gains


Losses


Fair Value(In thousands)Debt securities:Government-sponsored enterprises

$
120,633


$
47


$
1,034


$
119,646Municipal bonds


18,220



567



75



18,712Corporate and other debt securities


8,000







15



7,985146,853



614



1,124



146,343Mortgage-backed securities:Federal Home LoanMortgage Corporation


1,072,121



2,366



8,615



1,065,872Federal National Mortgage
    Association


612,556



3,347



4,102



611,801Government National Mortgage
    Association


16,465



480



13



16,932Federal housing authorities


3,336



439







3,775Non-agency securities


189,551



217



1,552



188,2161,894,029



6,849



14,282



1,886,596Total securities
    held-to-maturity

$
2,040,882


$
7,463


$
15,406


$
2,032,939  64




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
   held-to-maturity held-to-maturity held-to-maturity held-to-maturity held-to-maturity.
  held-to-maturity
  June 30, 2006Amortized


EstimatedCost


Fair Value(In thousands)Due after one year through five
    years

$
33,015


$
31,546Due after five years through ten
    years


94,412



89,547Due after ten years


136,923



136,680Total

$
264,350


$
257,773     held-to-maturity
  June 30, 2006Less Than 12 Months


12 Months or More


TotalEstimated


Unrealized


Estimated


Unrealized


Estimated


UnrealizedFair Value


Losses


Fair Value


Losses


Fair Value


Losses(In thousands)Debt securities:Government-sponsored enterprises

$
27,807


$
1,193


$
84,895


$
5,225


$
112,702


$
6,418Municipal bonds










1,596



25



1,596



25Corporate and other debt securities


53,041



409











53,041



40980,848



1,602



86,491



5,250



167,339



6,852Mortgage-backed securities:Federal Home Loan Mortgage
    Corporation


243,314



5,744



522,465



27,954



765,779



33,698Federal National Mortgage
    Association


206,292



5,447



265,759



15,012



472,051



20,459Government National Mortgage
    Association


929



7



320



3



1,249



10Non-agency securities


32,326



1,335



111,087



6,206



143,413



7,541482,861



12,533



899,631



49,175



1,382,492



61,708Total

$
563,709


$
14,135


$
986,122


$
54,425


$
1,549,831


$
68,560  65




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
   June 30, 2005Less Than 12 Months


12 Months or More


TotalEstimated


Unrealized


Estimated


Unrealized


Estimated


UnrealizedFair Value


Losses


Fair Value


Losses


Fair Value


Losses(In thousands)Debt securities:Government-sponsored enterprises

$



$



$
89,086


$
1,034


$
89,086


$
1,034Municipal bonds


1,708



32



3,611



43



5,319



75Corporate and other debt securities


5,985



15











5,985



157,693



47



92,697



1,077



100,390



1,124Mortgage-backed securities:Federal Home Loan Mortgage
    Corporation


154,611



1,175



577,331



7,440



731,942



8,615Federal National Mortgage
    Association


126,539



588



246,417



3,514



372,956



4,102Government National Mortgage
    Association


4,489



13











4,489



13Non-agency securities


29,633



209



114,786



1,343



144,419



1,552315,272



1,985



938,534



12,297



1,253,806



14,282Total

$
322,965


$
2,032


$
1,031,231


$
13,374


$
1,354,196


$
15,406   other-than-temporarily
  other-than-temporarily
 66




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
   (5)
    Securities
    Available-for-Sale  available-for-sale
  June 30, 2006Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost


Gains


Losses


Fair Value(In thousands)Equity securities

$
35,000


$
35


$



$
35,035Mortgage-backed securities:Federal Home Loan Mortgage
    Corporation


124,845



14



4,095



120,764Federal National Mortgage
    Association


208,545







6,751



201,794Non-agency securities


178,446







7,163



171,283511,836



14



18,009



493,841Total securities
    available-for-sale

$
546,836


$
49


$
18,009


$
528,876   June 30, 2005Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost


Gains


Losses


Fair Value(In thousands)Equity securities

$
35,000


$



$
175


$
34,825Mortgage-backed securities:Federal Home Loan Mortgage
    Corporation


156,162



136



1,192



155,106Federal National Mortgage
    Association


262,644



763



1,071



262,336Non-agency securities


223,861



221



2,398



221,684642,667



1,120



4,661



639,126Total securities
    available-for-sale

$
677,667


$
1,120


$
4,836


$
673,951   available-for-sale available-for-sale available-for-sale
  other-than-temporary.
     67




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
   available-for-sale
  June 30, 2006Less Than 12 Months


12 Months or More


TotalEstimated


Unrealized


Estimated


Unrealized


Estimated


UnrealizedFair Value


Losses


Fair Value


Losses


Fair Value


Losses(In thousands)Mortgage-backed securities:Federal Home Loan Mortgage
    Corporation

$
6,608


$
87


$
105,129


$
4,008


$
111,737


$
4,095Federal National Mortgage
    Association


92,580



2,549



109,214



4,202



201,794



6,751Non-agency securities


47,079



1,551



124,204



5,612



171,283



7,163Total

$
146,267


$
4,187


$
338,547


$
13,822


$
484,814


$
18,009   June 30, 2005Less Than 12 Months


12 Months or More


TotalEstimated


Unrealized


Estimated


Unrealized


Estimated


UnrealizedFair Value


Losses


Fair Value


Losses


Fair Value


Losses(In thousands)Equity securities

$
34,825


$
175


$



$



$
34,825


$
175Mortgage-backed securities:Federal Home Loan Mortgage
    Corporation










134,014



1,192



134,014



1,192Federal National Mortgage
    Association


57,283



300



92,842



771



150,125



1,071Non-agency securities


27,825



229



134,557



2,169



162,382



2,39885,108



529



361,413



4,132



446,521



4,661Total

$
119,933


$
704


$
361,413


$
4,132


$
481,346


$
4,836   other-than-temporarily
 68




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
   (6)
    Loans
    Receivable, Net    June 30,2006


2005(In thousands)Residential mortgage loans:One-to four-family

$
2,646,056


$
1,850,806FHA


20,503



30,273Multi-family and commercial


76,976



17,181Construction loans


65,459



6,465Consumer and other loans


139,336



81,641Total loans


2,948,330



1,986,366Premiums on purchased loans


20,327



14,113Deferred loan fees, net


(1,734
)


(881
)Allowance for loan losses


(6,340
)


(5,694
)$
2,960,583


$
1,993,904       Year Ended June 30,2006


2005


2004(In thousands)Balance at beginning of year

$
5,694


$
5,193


$
4,750Loans charged off


(153
)


(125
)


(306
)Recoveries


199



26



149Net charge-offs


46



(99
)


(157
)Provision for loan losses


600



600



600Balance at end of year

$
6,340


$
5,694


$
5,193     No. ofLoans


Amount(In thousands)June 30, 2006


31


$
3,299June 30, 2005


64



7,865June 30, 2004


85



9,066    69




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
     (7)
    Accrued
    Interest Receivable    June 30,2006


2005(In thousands)Securities

$
10,110


$
11,071Loans receivable


10,943



7,192$
21,053


$
18,263   (8)
    Financial
    Transactions with Off-Balance-Sheet Risk and Concentrations of
    Credit Risk      case-by-case
  and/or
   70




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
    held-for-sale held-for-sale
  (9)
    Office
    Properties and Equipment, Net    June 30,2006


2005(In thousands)Land

$
5,458


$
5,458Office buildings


11,247



11,266Leasehold improvements


13,626



13,489Furniture, fixtures and equipment


16,907



16,284Construction in process


470



46447,708



46,961Less accumulated depreciation and
    amortization


19,797



17,417$
27,911


$
29,544      71




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
   (10)
    Deposits    June 30,2006


2005Weighted








WeightedAverage





% of


Average





% ofRate


Amount


Total


Rate


Amount


Total(Dollars in thousands)Savings


0.83
%

$
226,245



6.85
%


0.83
%

$
271,071



8.36
%Checking accounts


2.08



349,014



10.57



1.30



277,317



8.56Money market deposits


1.56



212,200



6.43



1.32



318,432



9.83Total transaction accounts


1.58



787,459



23.85



1.16



866,820



26.75Certificates of deposit


4.06



2,514,584



76.15



2.87



2,373,600



73.253.47
%

$
3,302,043



100.00
%


2.42
%

$
3,240,420



100.00
%     June 30, 2006(In thousands)Within one year

$
1,913,251One to two years


327,721Two to three years


156,173Three to four years


47,410After four years


70,029$
2,514,584       Year Ended June 30,2006


2005


2004(In thousands)Savings

$
2,820


$
2,349


$
2,576Checking accounts


6,027



2,533



2,087Money market deposits


3,423



5,075



5,231Certificates of deposit


84,308



59,905



55,551$
96,578


$
69,862


$
65,445  72




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
   (11)
    Borrowed
    Funds    June 30,2006


2005Weighted





WeightedAverage





AveragePrincipal


Rate


Principal


Rate(Dollars in thousands)Funds borrowed under repurchase
    agreements:FHLB

$
670,000



4.48
%

$
1,125,000



3.58
%Other brokers


425,000



5.02



100,000



2.96Total funds borrowed under
    repurchase agreements


1,095,000



4.69



1,225,000



3.53FHLB advances


150,740



5.36



88,769



3.49Total borrowed funds

$
1,245,740



4.77


$
1,313,769



3.53     June 30,2006


2005Weighted





WeightedAverage





AveragePrincipal


Rate


Principal


Rate(Dollars in thousands)Within one year

$
850,000



4.88
%

$
893,000



3.40
%One to two years


80,104



3.62



275,000



3.94Two to three years


65,000



3.85



80,107



3.62Three to four years










65,000



3.52Four to five years


250,000



5.00







After five years


636



1.25



662



1.25Total borrowed funds

$
1,245,740



4.77


$
1,313,769



3.53    73




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
     June 30,2006


2005(In thousands)Amortized cost of collateral:Government-sponsored enterprises

$




69,000Mortgage-backed securities


1,230,119



970,746Total amortized cost of collateral

$
1,230,119



1,039,746Fair value of collateral:Government-sponsored enterprises

$




68,288Mortgage-backed securities


1,179,806



965,802Total fair value of collateral

$
1,179,806



1,034,090       12-month
    (12)
    Income
    Taxes    Year Ended June 30,2006


2005


2004(In thousands)Current tax expense (benefit):Federal

$
15,755


$
(4,179
)

$
12,791State


1,391



902



85417,146



(3,277
)


13,645Deferred tax expense (benefit):Federal


(9,584
)


(25
)


(1,580
)State


(154
)


(44
)


(399
)(9,738
)


(69
)


(1,979
)Total income tax expense (benefit)

$
7,408


$
(3,346
)

$
11,666  74




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
     Year Ended June 30,2006


2005


2004(In thousands)Expected federal
    income tax expense (benefit)

$
7,848


$
(2,271
)

$
11,026State tax, net


804



558



295Bank owned life insurance


(936
)


(1,392
)


(351
)Change in valuation allowance for
    deferred tax assets






401



1,083Dividend received deduction


(447
)


(435
)


(343
)Other


139



(207
)


(44
)Total income tax expense (benefit)

$
7,408


$
(3,346
)

$
11,666     June 30,2006


2005(In thousands)Deferred tax asset:Employee benefits

$
7,062


$
6,623Minimum pension liability


245



734Deferred compensation


1,378



1,198State net operating loss
    carryforwards


10,676



8,604Allowance for delinquent interest


167



311Intangible assets


1,890



2,353Allowance for loan losses


2,059



1,784Net unrealized loss on securities
    available-for-sale


7,203



1,404New Jersey alternative minimum
    assessment


4,230



3,249Capital losses on equity securities


1,732



1,732Contribution to charitable
    foundation


8,513



Federal NOL carryover


869



ESOP shares allocated


652



Other


1,249



524Gross deferred tax asset


47,925



28,516Valuation allowance


(17,841
)


(13,585
)30,084



14,931Deferred tax liability:Discount accretion


443



558Premises and equipment,
    differences in depreciation


427



663Undistributed income of real
    estate investment trust subsidiary






582ESOP loan amortization


1,038



Gross deferred tax liability


1,908



1,803Net deferred tax asset

$
28,176


$
13,128  75




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
       (13)
    Benefit
    Plans  Defined
    Benefit Pension Plan
   76




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
   SERP
    and Directors Plan
    SERP and Directors PlanJune 30,2006


2005(In thousands)Change in benefit obligation:Benefit obligation at beginning of
    year

$
14,351


$
12,082Service cost


1,381



729Interest cost


801



751Amendment to plan


976



Actuarial (gain) loss


(1,048
)


1,564Benefits paid


(750
)


(775
)Benefit obligation at end of year

$
15,711



14,351Funded status

$
(15,711
)


(14,351
)Unrecognized prior service cost


1,008



220Unrecognized net actuarial loss


2,703



4,074Net amount recognized in the
    consolidated balance sheets

$
(12,000
)


(10,057
)Amounts recognized in the
    consolidated balance sheets:Accrued pension cost

$
(13,480
)


(12,148
)Intangible asset for prior service
    cost


867



255Pre-tax charge to accumulated
    other comprehensive loss for additional minimum pension liability


613



1,836Net amount recognized

$
(12,000
)

$
(10,057
)         SERP and Directors PlanYears Ended June 30,2006


2005


2004(In thousands)Service cost

$
1,381


$
729


$
427Interest cost


801



751



687Amortization of:Prior service cost


186



89



70Net loss


325



199



203Total net periodic benefit expense

$
2,693


$
1,768


$
1,387  77




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
     2006


2005


2004Discount rate


5.25
%


6.25
%


6.00
%Rate of increase in future
    compensation levels


7.21



6.60



4.10   2007-2011 2012-2016
  Other
    Postretirement Benefits
    Other BenefitsJune 30,2006


2005(In thousands)Change in benefit obligation:Benefit obligation at beginning of
    year

$
11,805


$
9,276Service cost


196



217Interest cost


497



572Actuarial (gain) loss


(3,631
)


1,993Benefits paid


(271
)


(253
)Benefit obligation at end of year

$
8,596


$
11,805Funded status

$
(8,596
)

$
(11,805
)Unrecognized prior service cost


1,808



4,290Unrecognized net actuarial loss


565



2,009Accrued postretirement benefits
    cost recognized in the consolidated balance sheets

$
(6,223
)

$
(5,506
)    78




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
     Other BenefitsYears Ended June 30,2006


2005


2004(In thousands)Service cost

$
196


$
217


$
175Interest cost


497



572



440Amortization of:Net loss


94



86



12Transition obligation


201



201



201Total net periodic benefit expense

$
988


$
1,076


$
828       1%


1%Increase


Decrease(In thousands)Effect on:Service cost

$
39


$
(30
)Interest Cost


90



(72
)   2007-2011 2012-2016
  FAS 106-2, Accounting and Disclosure Requirements Related to the
    Medicare Prescription Drug, Improvement and Modernization Act of
    2003
  401(k)
    Plan
    Employee
    Stock Ownership Plan
   79




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
        (14)
    Commitments
    and Contingencies      Year Ending June 30,

Amount(In thousands)2007

$
3,5352008


3,3872009


3,1422010


3,0442011


2,909Thereafter


23,515$
39,532   (15)
    Fair
    Value of Financial Instruments  Disclosures about Fair Value of
    Financial Instruments
  Cash
    and Cash Equivalents
    Securities
   80




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
    FHLB
    Stock
  and/or
  Loans
        held-for-sale
  Deposit
    Liabilities
    Commitments
    to Extend Credit
   81




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
     June 30,2006


2005Carrying





CarryingAmount


Fair Value


Amount


Fair Value(In thousands)Financial assets:Cash and cash equivalents

$
39,824


$
39,824


$
81,329


$
81,329Securities
    available-for-sale


528,876



528,876



673,951



673,951Securities
    held-to-maturity


1,763,032



1,695,975



2,040,882



2,032,939Stock in FHLB


46,125



46,125



60,688



60,688Loans


2,961,557



2,803,581



1,997,316



1,986,715Financial liabilities:Deposits


3,302,043



3,277,131



3,240,420



3,233,958Borrowed funds


1,245,740



1,231,908



1,313,769



1,311,994   Limitations
      (16)
    Regulatory
    Capital     82




---



##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Minimum RequirementsTo Be Well CapitalizedFor Capital


Under Prompt CorrectiveActual


Adequacy Purposes


Action ProvisionsAmount


Ratio


Amount


Ratio


Amount


Ratio(Dollars in thousands)As of June 30,
    2006:Total capital (to risk-weighted
    assets)

$
663,141



26.5
%

$
200,354



8.0
%

$
250,443



10.0
%Tier I capital (to
    risk-weighted assets)


656,801



26.2



100,177



4.0



150,266



6.0Tier I capital (to average
    assets)


656,801



12.3



214,446



4.0



268,057



5.0As of June 30,
    2005:Total capital (to risk-weighted
    assets)

$
415,477



21.5
%

$
154,767



8.0
%

$
193,459



10.0
%Tier I capital (to
    risk-weighted assets)


409,783



21.2



77,383



4.0



116,075



6.0Tier I capital (to average
    assets)


409,783



8.3



197,983



4.0



247,479



5.0   (17)
    Parent
    Company Only Financial Statements    Balance
    Sheets
  June 30,2006


2005(In thousands)Assets:Cash and due from bank

$
211,794


$
25Investment in subsidiary


646,910



407,802ESOP loan receivable


39,999



Other assets


1,851



Total Assets

$
900,554


$
407,827Liabilities and Stockholders
    Equity:Total liabilities

$
367


$
Total stockholders equity


900,187



407,827Total Liabilities and
    Stockholders Equity

$
900,554


$
407,827  83




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##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Statements
    of Operations
  Year Ended June 30,2006


2005


2004(In thousands)Income:Interest on ESOP loan receivable

$
2,087


$



$
Interest on deposit with subsidiary


3,549







5,636







Expenses:Contribution to charitable
    foundation


20,651







Interest expense on stock
    subscriptions


711







Other expenses


350







21,712







Loss before income tax expense


(16,076
)






Income tax expense


346







Loss before undistributed earnings
    of subsidiary


(16,422
)






Equity in undistributed earnings
    (loss) of subsidiary


31,436



(3,142
)


19,837Net income (loss)

$
15,014


$
(3,142
)

$
19,837   Statements
    of Cash Flows
  Year Ended June 30,2006


2005


2004(In thousands)Cash flows from operating
    activities:Net income (loss)

$
15,014


$
(3,142
)

$
19,837Adjustments to reconcile net
    income (loss) to net cash used in operating activities:Equity in (undistributed earnings)
    loss of subsidiary


(31,436
)


3,142



(19,837
)Contribution of stock to
    charitable foundation


15,488







Increase in other assets


(1,851
)






Increase in other liabilities


367







Net cash used in operating
    activities


(2,418
)






Cash flows from investing
    activities:Capital contribution to subsidiary


(255,500
)






Loan to ESOP


(42,541
)






Principal collected on ESOP loan


2,542







Net cash used in investing
    activities


(295,499
)






Cash flows from financing
    activitiesProceeds from stock offering, net


509,686







Cash provided by financing
    activities


509,686







Net change in cash and due from
    bank


211,769







Cash and due from bank at
    beginning of year


25



25



25Cash and due from bank at end of
    year

$
211,794


$
25


$
25  84




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##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
   (18)
    Selected
    Quarterly Financial Data (Unaudited)    Fiscal 2006 Quarter EndedSeptember 30


December 31


March 31


June 30(In thousands, except per share data)Interest and dividend income

$
57,200


$
61,925


$
61,901


$
65,042Interest expense


32,634



34,196



34,530



40,436Net interest income


24,566



27,729



27,371



24,606Provision for loan losses


100



100



200



200Net interest income after
    provision for loan losses


24,466



27,629



27,171



24,406Other income


589



2,014



1,358



1,619Operating expenses


15,599



37,562



16,857



16,812Income (loss) before income tax
    expense (benefit)


9,456



(7,919
)


11,672



9,213Income tax expense (benefit)


3,495



(2,980
)


3,960



2,933Net income (loss)

$
5,961


$
(4,939
)

$
7,712


$
6,280Basic earnings (loss) per common
    share

$
n/a



(0.06
)


0.07



0.06Diluted earnings per common share


n/a



n/a



0.07



0.06   Fiscal 2005 Quarter EndedSeptember 30


December 31


March 31


June 30(In thousands, except per share data)Interest and dividend income

$
56,489


$
56,653


$
57,724


$
55,658Interest expense


31,602



32,379



32,533



30,165Net interest income


24,887



24,274



25,191



25,493Provision for loan losses


100



100



200



200Net interest income after
    provision for loan losses


24,787



24,174



24,991



25,293Other income (loss)


1,815



5,068



(9,952
)


638Operating expenses


14,770



14,788



58,765



14,979Income before income tax expense
    (benefit)


11,832



14,454



(43,726
)


10,952Income tax expense (benefit)


3,790



3,681



(14,770
)


3,953Net income (loss)

$
8,042


$
10,773


$
(28,956
)

$
6,999Basic Earnings per common share

$
n/a



n/a



n/a



n/aDiluted Earnings per common share


n/a



n/a



n/a



n/a   (19)
    Earnings
    Per Share    (20)
    Recent
    Accounting Pronouncements  No. FAS 115-1 FAS 124-1, Other-Than-Temporary
 85




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##### Table of Contents



INVESTORS
    BANCORP, INC. AND SUBSIDIARY
  Notes to
    Consolidated Financial
    Statements  (Continued)
  other-than-temporary other-than-temporary 03-1 other-than-temporary other-than-temporary
  fair-value-based
       86




---



##### Table of Contents



ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES (Continued)  Financial Statement Schedules
    Exhibits
  3
.1

Certificate of Incorporation of
    Investors Bancorp, Inc.*3
.2

Bylaws of Investors Bancorp, Inc.*4


Form of Common Stock Certificate
    of Investors Bancorp, Inc.*10
.1

Form of Employment Agreement*10
.2

Form of Change in Control
    Agreement*10
.3

Investors Savings Bank Director
    Retirement Plan*10
.4

Investors Savings Bank
    Supplemental ESOP and Retirement Plan*10
.5

Investors Savings Bank Executive
    Supplemental Retirement Wage Replacement Plan*10
.6

Investors Savings Bank Deferred
    Directors Fee Plan*10
.7

Investors Bancorp, Inc. Deferred
    Directors Fee Plan*21


Subsidiaries of Registrant*31
.1

Certification of Chief Executive
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 200231
.2

Certification of Chief Financial
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 200232


Certification of Chief Executive
    Officer and Chief Financial Officer pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002     *
    
    Incorporated by reference to the Registration Statement on
    Form S-1
    of Investors Bancorp, Inc. (file
    no. 333-125703),
    originally filed with the Securities and Exchange Commission on
    June 10, 2005. 87




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##### Table of Contents



SIGNATURES    INVESTORS BANCORP, INC.
  By:
    /s/  Robert
    M. Cashill            Signatures

Title

Date/s/  Robert
    M. CashillRobert
    M. Cashill

Chief Executive Officer and
    President (Principal Executive Officer)

September 15, 2006/s/  Domenick
    A. CamaDomenick
    A. Cama

Executive Vice President and
    Chief Financial Officer
    (Principal Financial and
    Accounting Officer)

September 15, 2006/s/  Doreen
    R. ByrnesDoreen
    R. Byrnes

Director

September 15, 2006/s/  Brian
    D. DittenhaferBrian
    D. Dittenhafer

Director

September 15, 2006/s/  Patrick
    J. GrantPatrick
    J. Grant

Director, Chairman

September 15, 2006/s/  John
    A. KirkpatrickJohn
    A. Kirkpatrick

Director

September 15, 2006/s/  Vincent
    D. Manahan, IIIVincent
    D. Manahan, III

Director

September 15, 2006/s/  Joseph
    H. Shepard IIIJoseph
    H. Shepard III

Director

September 15, 2006/s/  Rose
    SiglerRose
    Sigler

Director

September 15, 2006/s/  Stephen
    J. SzabatinStephen
    J. Szabatin

Director

September 15, 2006  88